The outbreak of the COVID-19 pandemic triggered unforeseen economic problems all over the globe. Consequently, several countries were compelled to impose special regulations to curb the financial crunch as much as possible. And Finland is not an exception here. One major regulation was laid on the rate of interest on specific consumer credit in Finland.
It was done solely to help people withstand the wallops of debt. However, the best part is that Finland has successfully thwarted the overall economic disaster, in certain cases, more decisively than many other countries. The credit goes to the Finnish government’s efforts to help people stay afloat during these difficult times.
At the beginning of 2021, even though the second wave of the pandemic shook Finland and wreaked havoc on its economy, things look better. It has only been possible due to the positive performance of the Finnish economy towards the second half of 2020. And going by estimates, the pace of economic recovery is likely to gain greater momentum towards the latter part of 2021.
Given its positive stance, people believe that sooner than later, Finland will be able to come out of the claws of COVID-19 and be back on track as far as its economy is concerned. Various factors have triggered this positive mindset in the country. However, the primary reason could be attributed to the availability of vaccines. It was clear that COVID-19 could be beaten only with the help of an effective vaccination policy and the availability of those vaccines. Finland has a small population, and hence its requirement for vaccines is also less. By early 2021 vaccines were made available, and Finland has made good use of this opportunity to rapidly vaccinate the majority of its citizens.
An overall positive economic outlook for Finland in 2021
The Finnish economy was recovering quite fast, after the first shock of the pandemic. But, since late 2020, a slowdown crept in with the second wave. However, that economic setback has waned now. And by the end of this year i.e. 2021, Finland’s economy is expected to see a growth of around 2%.
- Steady growth in numbers of employment
Finland’s economic comeback has brought forth positive results as expected. Firstly, the rate of employment is observed to be gradually crawling up. There has been a growth of 2% in verticals of employment and wage.
Most of this employment growth has been in the services sector. Estimations say that the earnings of families which were unaffected by unemployment, will also gain a boost, and consumerist confidence will rise as this pandemic retreats.
A spike in the rate of employment will help ensure that finances keep flowing in the system, thereby enabling the economic revival at a rate faster than expected. Moreover, the buying capacity of the citizens is also likely to recover with the increase in employment.
- Growth in private consumption
The rise in private consumption is one of the principal driving forces behind the economic recovery in Finland.
In 2020, the rate of personal consumption slid into a slump showing a 4% contraction. Reports suggest that Finnish households saved about 5% on their overall disposable income. This is indeed alarming, for when people start saving on their disposable income, the nation’s economy suffers in more than one way. Firstly the liquidity in the market is reduced substantially, and there are a lot of industries like hospitality and tourism that are the most common beneficiaries of the spending of disposable income. When people stop spending from their disposable income, these industries are the first ones to get hit miserably.
However, with widespread vaccination drives, and relaxation of certain COVID-19 restrictions, it is expected that the consumer sentiment will start leaning more towards purchasing a little more thriftily. Finland can expect to see a growth of at least 3.3% in the sector of private consumption this year.
- A stronger than expected manufacturing industry
The manufacturing industry has shown resilience in battling the pandemic blows. By the end of 2020, it was evident that new manufacturing orders that had piled up had shown yearlong improvement compared to what was observed in 2019.
The export of goods from Finland is clearly indicative of the fact that global trade is recovering at a faster pace than expected. A considerable percentage of Finland’s economy depends on the manufacturing industry and export of these finished goods. With the strength that lies in Finland’s manufacturing industry, the country can expect to be back in top gear soon.
- An efficient and proactive government at the helm
The government of Finland has taken over to manage the economic meltdown caused due to the COVID-19 crisis very systematically. It has been effectively offering monetary assistance to businesses, unemployed people, municipalities, and more. The government has utilized the taxpayers’ money in the best possible manner to provide economic respite to various sectors. The subsidies from the central government proved quite beneficial for the municipalities.
The best part is that the Finnish government has been able to procure help at lower rates. So, even though the debts are higher in value for the government, the interest rates on these debts are not that high.
The additional burden of debts might give rise to a situation that adversely impacts the economic sentiment by the rise in rates of interest. The government can offset such risks by adopting measures like extending the average maturity tenure of the debts, and then by the process of average-fixing.
Final words
Considering all the scenarios and the current status of Finland’s economy, it can be safely said that various positive factors are accountable for helping the country spring back financially. An increase in vaccination coverage is the prime factor here. Of course, the citizens and the Finnish government have worked in conjunction to ensure this financial recovery. Reports suggest that Finland’s economic growth in 2021 is estimated to rise higher than projections published in reports in December 2020.